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What is an apple to apple comparison?

Yesterday, after our blog post went out, a reader DMed to ask what a "fair comparison" is. In the post (that you can read here), we compared the 420sqft Soho 188 unit in Farrer Park to the 452sqft Centra Suites unit. Is this a fair comparison, and why?

Apples to Apples

Something you often hear property people say is that something is not an apples to apples comparison. It is often used to point out that the basis for comparison isn't entirely fair or that the variables are too great to justify a comparison. If the basis of comparison is not fair, it can lead to a skewed or incorrect understanding of the things being compared.

So what are some examples of unfair basis of comparison?

StackedHomes alluded to these common practices of unfair comparisons and used the following example in one of their posts.

  • "A unit in condos like The M can cost around $3,000+ psf. Someone may show you proof, and then try to convince you that – because data shows price averages of $2,700+ psf in the area, you should therefore pick a cheaper option (probably the one they’re trying to sell you)."

Take a look at the comparison below:

StackedHomes Floorplan Comparison

Notice the floorplans are presented with no scale. In addition, the images are resized to give the illusion that they're similar in sizes and configuration (2 bed + 2 bath). We could worry about AC ledges, use of space, etc. the fastest way to reset your own biases is just to do some simple PSLE math.

Property comparison table

The new launch is in fact 2/3 of the floor space of the resale on the left. With a 200sqft difference in floor area between these two units, there is actually no reason to be comparing them at all.

On top of that, we're also missing many critical pieces of context information like leasehold (99y vs Freehold), age of the resale, location of both projects.

When buying property, we are often presented with incomplete or poor quality data pair with highly misleading visualizations. These unfair comparisons often lead us to poor decisions. To make a fair comparison, the variables being compared should be sufficiently similar, allowing for a valid and reliable comparison to be drawn.

Here's a minimal checklist of things you should look out for when comparing units:

  • Floor area
  • PSF
  • Price
  • Unit configuration (# of beds and baths)
  • Age
  • Leasehold
  • Date of transaction: It is unwise to compare a transaction from 3 years ago vs the current market. Inflation, macro effects, mortgage rates all have significant impact on the market. You cannot expect prices to stay high or low in different market conditions.

The elusive Ceteris Paribus

Here's a term we often heard in science classes and/or econs classes. In any ideal situation when we are comparing two things, we want to hold all other variables constant -- "all else being equal." However, this is sometimes damn near impossible and often "detached from the facts of reality."

Reality has too many variables. No two things are a hundred percent equal. So when establishing a basis for comparison, we try to hold as many variables constant as possible, but never all.

Ironically, a common rebuttal I get from sales agent is that something isn't a fair comparison because of very minute differences. For example, the unit could well be in the same project, layout, configuration and even facing but are on different floors - but we shouldn't compare their prices because higher floors fetch better prices.

This is in fact a logical fallacy of irrelevant comparison where someone dismisses a comparison as unfair due to minor or irrelevant differences, despite the overall similarity of the items being compared. The sales agent's refusal to acknowledge the similarities is often driven by a need to avoid a valid comparison of prices often because their asking prices are too high or low.

The Why

Trying to find a perfect comparison is often unproductive and futile. What's more important is actually establishing the goal of your comparison.

Are you comparing the units:

  • To benchmark a reasonable price to buy or sell a unit at?
  • To forecast price trends in a neighorhood?
  • To figure out what unit layout / configurations do better in rentals?
  • To understand the resale values of different types of projects?

Once you've establish that, the next step is not to eliminate any and all variables but to be aware of the differences and account for them in your comparison.

In the earlier example, if you're holding onto a 2nd floor unit and comparing your selling price against a similar units on higher floors, you should definitely factor in a slight discount in your selling price. However, if prices are trending up, this holds true.

That being said, it's pretty important to not let old maid's adages stop you from asking for your desired price. There are buyers out there that have a strong preference for lower level units (e.g. people with a crippling fear of heights, families with little children). At the end of the day, its about finding the best buyer for your unit at the best price.

Small practice exercise

  • Let's take everything we've talked about above and apply it to our use case from yesterday.
  • First let's set an objective -- Understand the price difference between Farrer Park and Aljunied.
  • Once we have that objective, we want to hold as many constants possible so we can isolate Farrer Park and Aljunied as one of the only variables.
  • Let's take a look at how the two units stack up:

Centra Suites vs Soho 188 comparison table

Overall, the comparison is more or less fair with one important thing to note and adjust our analysis for. You might have noticed the last transaction date for Soho 188 in Farrer Parkis in 2022 while Centra Suites' transaction prices reflect that of 2024.

There are two ways we can make this a fairer comparison:

  • Fastest
    • Look for other unit sizes in Soho 188 that may have higher transaction volume and extrapolate the price trends from there. This has its own risks because different unit sizes often have different sale trajectory.
  • More accurate
    • The other way is to go back in time with Centra Suites and find transaction data in the year of 2022. 2022 saw two transactions between $1428 - $1512, widening the gap between Aljunied and Farrer Park.

Trasanction data for Centra Suites

  • Further research
    • The contextually cement your findings, you could also look into the overall price trends in both regions for the unit size range of (400 - 500sqft). This will often help you to understand if prices in an area is trending up faster than the other.

All right, thats all for today folks, we hope this blog post has been helpful. If you'd like to see more educational content like such, drop us a note and let us know!

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